Countercyclical (or counter-cyclical, Activist policies) is a term that describes policies or economic effects that work against cyclical tendencies in the economy.[1] For example, if the economy were on an upswing, policies or effects described as countercyclical would cool down the economy. Conversely, when the economy is in a downturn, such policies or effects would ideally stimulate the economy.[2]
Keynesian Economics advocate the use of discretionary countercyclical fiscal policies to lessen the impact of the business cycle. Other schools of economic thought, such as monetarism and rational expectations, hold that countercyclical policies are counterproductive or destabilizing, and favor a laissez-faire fiscal policy as a better method for maintaining overall economic health.
In finance, a business or financial instrument that tends to do well while the economy as a whole is doing poorly, is typically referred to as countercyclical. Usually this would be a business, or a financial instrument whose value is derived from a business, that sells an inferior good.
